Hines Confidence in Australian Build-to-Rent Holding Fast

Carry on regardless.

That would seem to be the mantra for Australia’s emerging build-to-rent sector as it continues to accelerate amid mounting challenges in the development and construction industry.

“There are challenges that we all face,” Hines managing director and head of living Australia Sam Bisla said. “There’s construction costs escalation, land is arguably scarce and planning is difficult.

“But they’re all surmountable and we will continue to push on.”

US-based Hines is the second-largest global build-to-rent player behind Greystar and, in partnership with Canadian pension fund Cadillac Fairview, plans to acquire and develop up to $1.5 billion of assets in the burgeoning sector in Australia.

▲ A render of Hine's build-to-rent development at 15 Bank Street, South Melbourne (all images this report).

“We’re a large player in the US and Europe, and so we see no reason we can’t be a large player here,” said Bisla, who will be a speaker at The Urban Developer’s The Evolution of Build-to-Rent in Australia vSummit on May 25.

“We have ambitions to be in every capital city in Australia and across the pond in New Zealand as well. So, we’re in expansion mode for sure.”

Only a year into its push into the fledgling Australian build-to-rent market Hines has already acquired three build-to-rent sites across Melbourne with the potential for about 900 apartments.

The seed assets include a 2874sq m site at 15-33 Bank Street and 35-37 Bank Street in South Melbourne it purchased for $40 million to develop 400 build-to-rent units; a 3068sq m site at 36-58 Macaulay Road, North Melbourne, acquired for $30 million with an existing approval for 220 apartments, and a 4247sq m site at 10 Ballarat Street, Brunswick, it paid $16.5 million for with plans for a 250-unit project.

“We’re actively pursuing more as you can imagine,” Bisla said. “Our mandate is across Australia and New Zealand so I’m on a plane quite regularly, hunting sites.”

He said the recent decision by the federal government to halve the controversial managed investment trust withholding tax for build-to-rent in a bid to boost housing supply was welcomed but as yet undefined.

▲ Hines was in Australia irrespective of the federal government tax cuts for the sector, Bisla said.

“It’s tough to understand what the criteria for those tax cuts are at the moment but Hines is here irrespective of those tax cuts. We’ve seen value in the asset class and we’re here and intend to expand regardless.

“Build-to-rent will be a large segment of the real estate market in Australia for sure.

“If you look in the US, the multi-family (as build-to-rent is known in other parts of the world) take-up of housing is about 35 per cent—a huge proportion of the housing stock. Here, we’re currently at 0.1 per cent. So, it just shows the potential for growth … it can be quite a large provider of housing stock.”

In the UK, the build-to-rent sector is about a decade ahead of its evolution in Australia and “tracking similarly”, Bisla said.

“But I think because of the housing shortage in Australia, it has the potential to accelerate much faster than the UK,” he said.

“And, although we’ve only been active in the Australian market for about a year, I'm confident if Hines can keep doing what we’re doing we can accelerate beyond our presence in the UK.”

The Urban Developer’s The Evolution of Build-to-Rent in Australia vSummit will be held on Thursday, May 25.

Click here for more details and to register.